As the national economy ebbs further and further away from the largest housing boom in American history, so too does every local economy in the country, and Alexandria is not exempt.

The Office of Management and Budget presented its projections for the current fiscal year Tuesday, indicating that the citys current budget is about $8 million more than it can afford. Various city departments will see cuts in their general fund budgets as a result, eventually culminating in a decrease in city services.

Though the city will struggle financially, it is projected to be a regional leader. Mayor Bill Euille praised the city staffs preparation and conservative approach to the budget process over the last few years, which he cited as the reason Alexandria is doingmarkedly better than its neighbors financially.

Weve all been impacted by the downturn of the economy, but we are weathering it fairly well, Euille said. But certainly not without challenges as well.

The $8-million shortfall stems from the downswing of the lucrative housing boom enjoyed by the city in the last six to eight years, as well as a wavering commercial real estate market.

Real estate taxes make up about 54 percent of the citys general fund budget, according to Bruce Johnson, director of the Office of Management and Budget. Real estate revenue is projected to fall about five percent, or $7.2 million, by January or February, according to a study that compared figures from the first six months of 2007 with the first six months of 2008, accounting for much of the shortfall.

Johnson said that his office had predicted no change in the coming assessment cycle when putting together the budget. He also said that things could get worse before they get better, but these figures are preliminary and more data has to be collected.

Were standing on an economic precipice at the moment and we really dont know what will happen in the next two days, let alone 18 months, Johnson said. And all of this that happens can affect us, and we will just be along for the ride.

The property tax assessment rose about $1 million, but recordation taxes are expected to fall and practically no commercial activity will add to the decline.
The $8 million makes up about 1.5 percent of the entire budget, which means various city departments will have to cut costs. Depending on the city department, directors are being asked to cut anywhere from 0 to 4.1 percent of their budgets.

This is not a call and response, Johnson said. Were not asking [city departments] for ideas. Were saying,  Your budget has been reduced, now tell us what youre going to do. Were asking departments to prioritize and keep whats most important and let some other things diminish.

Some departments will feel the hit more than others. Mandates keep the public health, public safety and city-sponsored housing essentially off-limits, and the Alexandria Economic Development Partnership will see some allowances, Johnson said.  The school system, which comprises 31 percent of the entire city budget, will likely remain uncut.

The schools have their own problems, Johnson said. He cited their enrollment (which is about 500 pupils higher than the system anticipated) and fuel costs that are off the charts. The decreases have begun, department heads are already prioritizing their needs, but Euille said he had a conversation with Superintendent Dr. Morton Sherman that indicated cooperation with the city if cuts were necessary.

We felt that doing an across-the-board cut would not make sense, Johnson said. If you had a village of 43 families and you were going to have to reduce everybodys budget 1.5 percent, you wouldnt really look at each of the families in the same way. You would make allowances for those who had young children, or older adults, or had obligations or debts that they had to pay, so we made some allowances for that.

Spending reduction plans are due from department heads in mid-October. They will be brought in front of the Council Oct. 25, during a retreat.